Oriola Oyj

Welcome to this Oriola Corporation Financial Statement 2020 info. My name is Tuula Lehto. I'm Oriola's Communication and Sustainability Director. With me here are our Interim CEO Juko Hakala and our CFO Helena Kukkonen. Today we go through the presentations and afterwards there's a possibility for questions. Please, Juko.

You can start. Thank you, Tuula. And welcome to this financial statements webcast also from my behalf. Please let me introduce myself. My name is Jukko Hakala. I am the chief executive officer of Oriola since February 1st this year. My task is to lead Oriola in the interim period as the company is currently active in the recruitment of the new CEO. And without further ado, let's move into the topics of the day, starting with quarter four highlights. Quarter four was a better quarter for Oriola. Naturally in the quarter four, As previously in the year, the COVID pandemic continued to impact Oriola's business environment. Restrictions for citizens in both Sweden and Finland continued to impact business volumes in pharmacies also in quarter four. The healthcare, elective care volumes continue to stay below customary levels, influencing our demand. And on a positive note, the Swedish online market continued its strong growth. On quarter four, the pharmaceutical volumes continued their decline in a comparable manner to the previous quarters. There was a 2-3% increase in the market value and a related net sales increase of 1.5% in our business. Importantly, our online sales in the Swedish consumer business grew by 107% versus a market growth of 66%. And our profitability developed to 8 million euros, driven by many parts of our business. In the consumer, we increased 3.3 million euros, improvement from multiple areas. And in retail, the dose business improvement were significant factors. We continued and we continue today committed to our cost control focus, as well as our strategic programs, customer experience and 20 by 20. Then onto the full year 2020 highlights. What an exceptional year it was. During the year, COVID pandemic had a significant impact on Oriola's operating environment and operations. We started the year in Q1 strong, as the upcoming COVID pandemic produced historically high order levels for our pharmacies in Finland and Sweden. Profitability wise, Q1 was a step start for the year with its 6.9 million euros of adjusted EBIT. We then moved into Q2, which we labeled a lost quarter with its negative 300,000 euros of adjusted EBIT. The restricted consumer mobility, especially in April-May, impacted buying behavior and the use of healthcare services negatively. Public healthcare focused on the preparations for and treatment of COVID-19 patients, which resulted in a partial standstill of the elective care. In addition, securing pharmaceutical deliveries in all circumstances raised operational costs for Auriola across the board. By Q3, the growing infection rate after the summer and speeding up towards Q4 kept us on our toes. The number of infections increased rapidly towards the end of the year. More restrictions for the citizens were set in Finland, and especially in Sweden, affecting our demand. The volumes of elective care stayed below the customary level, and moreover, the changes in buying behavior based on the restricted consumer mobility affected negatively to the demand for health and wellbeing products. However, we had also learned to adapt to the pandemic operationally and also accelerated important adjacent services like click and collect, click and drive, the COVID testing services of our pharmacies. Also, our profitability started to recover in Q3 with 6.3 million euros of adjusted profit for the quarter. And through Q3, we landed on to Q4, which we discussed on the previous page. So the year was exceptional, and equally exceptional was a continued decline in pharmaceutical volumes, 0.7% negative in the full year, and a significant slowdown in the market growth as well, from 6% to 7% we experienced in 2019, down to 4%. Our net sales continued to grow, but equally slower, 3.8% versus almost 13.6% in 2019 in constant currency, except in our online sales, which grew significantly throughout the year. What was very important for us throughout the year was that the distribution and the availability of pharmaceuticals was secured well during the pandemic in both of our markets. We performed seamlessly our important role in the society and our purpose Health for Life. There were no medicine shortages on the market. We built a national medicine stock service in Sweden. Pharmacies and distribution centers have been working throughout the pandemic. We have had strict safety measures for our employees. And importantly, our NPS has stayed stable or increased, particularly in Finland. So despite these changes, and many changes in our demand and these important full year operational characteristics, our profitability remained on the 2019 level in 21 million euros. The board of directors proposes to the AGM that a dividend of three cents per share is paid for 2020. In addition, it is proposed that the AGM would authorize the board to decide on the payment of an additional dividend up to a maximum of three cents per share. Then we can go into the numbers. Thank you. Yes. Here we can see the full year numbers on high level. There's a small increase in invoicing full year, 0.9% versus 6.1% in 2019. There's a slight increase in net sales full year, 4.6%. in comparison to 10.9 in 2019. And there's a slight increase in fully adjusted EBIT up to 21 million euros in comparison to 20.5 in 2019. So the quarter-adjusted EBIT was €8 million. It was up €5.9 million from Q4 2019, and the key factors were the consumer EBIT, which was up €3.3 million, based on cost savings, for example, in our marketing and support functions. Our retail EBIT, which was up 1.5 million euros, especially contributed to by the dose business in Sweden and some recovery in our assortment business in Sweden. The pharma stayed stable or was down by 0.1 million euros, driven mainly by changes in our customer agreements. We have discussed earlier in the year about as well. our end-shaping ramp-up as well as the COVID-19 related additional costs. And finally and importantly, our group items were 1.3 million less than in Q4 2019. Let's then take a look at the operating environment. In our consumer markets, the total pharmacy market in Sweden grew in both Q4 and in full year 2020. Oriola continued to have 17% market share in the total market. And for the total pharmacy market, the share of higher profitability, prescription, Rx, and over-the-counter pharmaceuticals declined, while the share of the traded goods increased. So there was a categorical change in the market as well. And importantly, as mentioned earlier on, our online sales outgrew the market growth at 107% for the quarter and 85% for the year. Then on to the wholesale markets. In Q4, the wholesale market value increased slightly in both Finland and Sweden. However, the market volume decreased in Q4 as well as in full year 2020. Oriola market share was flat year on year in Q4 in Sweden, and it was down in Finland. And in Finland, the key factor contributing to that difference was, for example, the contracts, the Orion non-med, which was also discussed in the interim report sessions earlier in the year. In retail markets, Oriola Markets share has been stable in the dose dispensing markets in both Sweden and Finland. The traded goods and over-the-counter product supply for pharmacies in Sweden has been stable at 25% of the total market. And during Q4, we served 121 out of 819 pharmacies in Finland with staffing services. That concludes the operational environment and Why don't we then move in discussing the business areas? The consumer Q4. Net sales increased slightly. There was a significant online sales growth, as mentioned earlier on. In the brick and mortar, unfortunately, an opposite effect. Demand continued to decrease, especially in the shopping centers. There was an essential improvement in profit coming from multiple areas, and most important of those areas was cost savings in marketing and support. A €4.4 million Q4 adjusted EBIT led us to a full year 2020 adjusted EBIT increase of 2.7% in consumer being at €14.4 million for the full year. In pharma, the net sales for Q4 stayed flat. Pharmaceutical volumes slowed down, as we discussed in the highlights, due to the pandemic, and the continued elective healthcare stayed down in both of our operating markets. The Q4 wholesale market volume change in Sweden, for example, was minus 5%, and in Finland, minus 2%. The profit was negatively impacted in pharma by changes in customer agreements. Also, the end-shaping ramp-up continued to impact our profit, as well as the continued COVID-19 related additional costs. A 4.1 million Q4 adjusted EBIT in pharma led to a full year 2020 adjusted EBIT decrease of 4.9 million euros, being at 12.8 million euros for the full year. Naturally, 2020 was a challenging year for Pharma. And the key profit impacts for the full year in Pharma were the same as in Q4. Changes in customer agreements, ramp-up in end-shipping, and COVID-19-related additional costs. In retail. there was a bit higher net sales increase, 5.3% in constant currency. Demand for the products related to the pandemic remained active, especially in Sweden. Masks and hand sanitizers are good examples of these. There was improved profitability in retail, especially coming from those dispensing and the assortment Sweden business area. 0.7 million Q4 adjusted EBIT led to a full year 2020 adjusted EBIT increase of 2.9 million euros in retail being at 2 million euros. The most significant factor also for the full Jerebit in retail was the dose dispensing business in Sweden. Then on to a few additional financial review slides. I will ask our CFO Helena Kukkonen to discuss these. Helena, please.

Thank you, Juuko. Hello also from my behalf. So moving into the invoicing and net sales. So starting with the invoices, during the year we had a small or flat disc growth versus then the sort of the normally seen higher growth rates. Invoicing now reaching 3.8 billion in the full year versus then 3.7 billion in 2019. And for the quarter, there was actually a negative growth of minus 1.7 in the constant currency, which was then driven by the lower volumes. On the net sales side, we had a moderate growth driven by the higher priced pharmaceuticals and also the e-com growth. Net sales for the full year reached 1.8 billion versus then the 1.7 in 2019 and for the quarter, the growth was moderate, 1.5 in constant currency. And then moving into adjusted EBIT. So for the adjusted EBIT, we ended the year with the best quarter for the year being 8 million. Now, improvement in our profits came across our businesses. Consumer improving the most by 3.3 million. And the improvements came from multiple areas, including the cost savings. Cost savings in marketing, support functions, and so on. Pharma on the other hand was more or less flat sort of year on year. Some changes in the customer agreements and also on the cost to serve and positives coming from the expert services improvement. Retail clearly improved from last year by 1.5 million. And then this was like Jukko was saying, driven by the dose dispensing. And on the group level, we also had some cost savings. Profit for the period and earnings per share. Moving into this one, so profit for the period was 4.1 million, which is a clear improvement than from the low level last year. Profit was impacted with the adjusting items where we had a 1.2 million cost related to an honoris contract in retail, which we now then put in Q4. Earnings per share was two cents for the quarter, and for the full year it was six cents up from the four cents last year. Moving into cash flow. So we ended the year with relatively good cash flow, being 46 million for the quarter. This was driven by the good cash flow and incoming payments at the end of the year. For the full year, our operating activities cash flow was 58 million. We invested 31 million into our IT, logistics and pharmacies. Also here we have included 5 million for the investment of the doctor.se, which we did in Q2. On the financing side in Q2, we withdraw the 70 million loans to secure our cash position. And now then ended the quarter with a good cash position at 168 million. Our net interest bearing debt levels, have actually slightly higher versus than a year ago, but then on the other hand reduced by 30 million since the end of September. And this was then driven by the higher amount of cash and also lower amounts of commercial papers and loans versus then the end of September. Juko, would you like to talk about the Q4 takeaways?